Superannuation is one of the most tax-effective places to hold investments in Australia, and capital gains tax (CGT) is a big part of why. Inside a complying super fund — including a self-managed super fund (SMSF) — capital gains are taxed far more lightly than they are in your own name. In accumulation phase the effective CGT rate is low; once the fund is paying a retirement pension, gains on assets supporting that pension can be effectively tax-free. Understanding this can shape when you sell assets and even where you choose to hold them.
This guide sits under our pillar, capital gains tax in Australia. If you are new to SMSFs, start with SMSF explained: self-managed super funds in Australia.
How super is taxed on capital gains
A complying super fund pays tax at a concessional rate of 15% on its income in accumulation phase. Capital gains sit within this, but with an important twist: super funds get a 33.3% CGT discount on assets held for more than 12 months (compared with the 50% discount for individuals).
That produces a low effective rate on long-held gains:
| Where the asset is held | CGT discount (held >12 months) | Effective tax on the gain |
|---|---|---|
| Individual (top of the range) | 50% | Up to roughly half your marginal rate |
| Super fund — accumulation phase | 33.3% | About 10% (15% on two-thirds of the gain) |
| Super fund — pension phase | n/a | Effectively nil |
So a gain that might be taxed heavily in your own name is taxed at roughly 10% inside super in accumulation, and can be tax-free once the assets support a retirement pension.
The 33.3% discount in accumulation phase
While your SMSF is in accumulation (building up, before you draw a pension), a capital gain on an asset held more than 12 months is reduced by one-third, then the remaining two-thirds is taxed at 15%. That works out to an effective rate of about 10%.
If the fund sells an asset it has held for less than 12 months, no discount applies and the full gain is taxed at 15%. As with individuals, the 12-month holding period is worth watching before selling. See the CGT discount and 12-month rule for the underlying rule.
Nil CGT in pension phase
This is the standout feature of super. When an SMSF starts paying an account-based (retirement-phase) pension, the earnings on the assets supporting that pension — including capital gains — are exempt from tax. Sell an asset while it is supporting a retirement pension and, in the usual case, there is effectively no CGT at all.
This creates a powerful timing consideration: members sometimes hold an appreciating asset until the fund moves into pension phase, so a large gain is realised when the fund’s tax rate on that gain is nil. It has to be balanced against the transfer balance cap (the general cap is $2.0m in 2025-26, rising to $2.1m in 2026-27), which limits how much can be moved into the tax-free retirement phase. How pensions are actually started and run is covered in SMSF pension phase: paying a pension.
Worked example
An SMSF holds an ETF parcel it bought for $200,000. It is now worth $320,000 — a $120,000 gain — and it has been held for more than 12 months.
If sold in accumulation phase:
| Item | Amount |
|---|---|
| Gross capital gain | $120,000 |
| Less 33.3% discount | −$40,000 |
| Taxable gain | $80,000 |
| Tax at 15% | $12,000 |
That is an effective rate of just 10% on the $120,000 gain.
If sold while supporting a retirement pension:
| Item | Amount |
|---|---|
| Gross capital gain | $120,000 |
| Tax payable | $0 |
The same gain, realised in pension phase, is effectively tax-free — a $12,000 difference on this parcel alone.
Segregation and the timing of sales
SMSFs that are partly in accumulation and partly in pension phase apportion their exempt income, so not every gain in a mixed fund is fully tax-free. Some funds use asset segregation or an actuarial certificate to work out the exempt proportion. This is technical territory where an SMSF administrator or accountant earns their fee, so get advice before relying on a nil-tax outcome. For the wider running of a fund, SMSF trustee responsibilities and the SMSF pillar cover your obligations.
Division 296 — the extra tax on very large balances
From 1 July 2026, Division 296 imposes an extra 15% tax on earnings for total super balances between $3m and $10m, and an extra 25% over $10m. It applies on a realised-earnings basis, with the first assessment in FY2026-27 and payable from 1 July 2027. For members with very large balances, this reduces some of the CGT advantage of holding assets in super, so it is worth factoring in if your balance is approaching $3m.
In-specie transfers and contributions
Moving an asset into an SMSF — for example, contributing listed shares you hold personally rather than cash — is a CGT event in your own name, because you are disposing of the asset to the fund. The transfer happens at market value, so any gain up to that point is taxed to you personally (with your 50% discount if eligible), even though no cash changes hands. From then on, future growth sits inside the fund’s concessional environment. This “in-specie” contribution can be a deliberate strategy, but it needs care: it uses your contribution caps and can trigger a personal CGT bill in the year of transfer, so model both sides before doing it.
Why holding location matters
The gap between the tax on a gain held personally and the same gain held in super is one of the strongest arguments for using super as a long-term investment vehicle. An asset expected to grow substantially over decades will usually end up far ahead if that growth compounds inside super — taxed at roughly 10% on realisation in accumulation, or nil in pension phase — rather than at your full marginal rate outside. This is a key reason the super contribution caps and salary sacrifice are worth using well before retirement, not just in your final working years.
Strategies and pitfalls
- Mind the 12-month mark so fund gains qualify for the 33.3% discount.
- Consider the timing of large sales relative to pension phase — but stay within the transfer balance cap.
- Don’t assume a mixed fund is fully exempt — gains are apportioned.
- Watch Division 296 if your balance is large.
- Keep the fund complying — the concessional rates only apply to complying funds.
For how these super concessions can be used to reduce CGT on assets held outside super too, see how to reduce CGT legally.
This article is general information only and not financial or tax advice; consider your own circumstances and speak to a licensed adviser or the ATO before acting.